Understanding Mortgage Terms

When going through the process of securing a new home, there are many terms that get used that might be new to you. Knowing and understanding these terms can make it easier to get through the mortgage and loan process and makes everything just a little bit easier.

Mortgage Terms:

Loan Term

The number of years it will take to repay the loan

Closing costs

The costs the buyer must pay during the mortgage process

Down Payment

The amount of the purchase price the buyer is paying


The difference in the value of the house and mortgage loan

Homeowner’s Insurance

New buyers secure property insurance prior to closing


The loan and all documentation for the home purchase

Settlement Costs

The final costs associated with the loan, settled before closing

Truth In Lending

A federal mandate lenders must follow to protect consumers from potential fraud.


Buyers set aside a percentage of yearly taxes to be held by the lender.

Fixed rate mortgage

The interest rate and the term of the loan is negotiated and set for the life of the loan, usually between 10 and 40 years.

Construction Mortgage

When building a home, a construction mortgage is used where money is advanced based on the construction schedule. After the home is built, it converts to a permanent mortgage.